7 Things To Do With Insurance Before You Retire To Save Money

You may think you have all your ducks in a row when it comes to retirement, but don’t forget that insurance plays a big part in remaining financially secure. If you’re retiring before the age of 65, it’s important to have health insurance until you’re eligible for Medicare. When you apply for Medicare you have some options, like buying Medicare Advantage instead of Original Medicare or buying Medicare Supplements, which will help with out-of-pocket expenses. You may also want to consider a long-term care policy to go with life insurance. Here’s more on how you can save money when it comes to insurance.

Key Takeaways Having the right insurance products will save you thousands of dollars, if something goes wrong with your health, your car or home. Even if you delay your retirement age, enroll in Medicare when you turn 65 or you may pay more in premiums or experience a delay in coverage. Adding a rider for long-term care insurance to your life insurance policy will help you pay for assisted care when you’re older.

1. Make Sure You Have Health Insurance Coverage if You’re Under 65

It’s not uncommon to retire earlier than age 65, but some people choose to work until well past retirement age. If you’re below the age of 65 and are retiring, it’s important to have health insurance, if you don’t yet qualify for Medicare.

Unfortunately, health insurance costs more as you age, but it also protects you against medical bankruptcy, in case you fall seriously ill or need surgery suddenly. An emergency room visit costs an average $2,700 if you’re not insured, and possibly much more, depending on treatment and the need for an overnight stay.

Some people are eligible for a Health Savings Account (HSA) if they qualify for a low-cost, high-deductible health plan. If you’re one of these people, aim to save the maximum amount each year so that when you later need help with medical bills, you can use your HSA funds for copays, over-the-counter medicines and more.

You can contribute up to $4,150 over the course of 2024 to a personal HSA account, and you may contribute up to $8,300 throughout the year to an HSA that also covers your family.^[1]

In addition, you can deposit an extra $1,000 per year as a “catch-up contribution” if you are at least 55 years old.^[1]

With an employer-sponsored health plan, you can contribute money into an Flexible Spending Account (FSA) but the funds may not roll over each year, unless your plan is set up to do so.

Compare health insurance rates, to see if you qualify for a subsidized plan or even Medicaid, depending on your income. Don’t cut health insurance coverage from your budget because medical costs will be much more expensive than a premium, if your health takes a turn or you are injured.

2. Buy Long-Term Care Insurance

Long-term care insurance helps if you need assistance with day-to-day chores, like bathing and cooking, either with the help of at-home care or at a long-term facility. Long-term care is an add-on rider on a life insurance policy.

Medicare usually only covers up to 100 days of care. After that, you’re on your own unless you have long-term care insurance, which begins coverage after 30 to 100 days worth of necessary assistance. There is, however, no deductible.^[2]

In 2022, prices for $165,000 in coverage for adults ages 55 through 65 cost $950 to $7,225 per year for individuals and $2,080 to $9,675 for couples. The older you are and poor health status will make this coverage more expensive.^[3]

You may be able to stop paying premiums once your benefits kick in. Otherwise, premiums may be tax deductible.^[2]

3. Make Sure To Sign Up for Medicare at Age 65

You'll pay a 10% penalty for each year you could have signed up for Medicare Part B, but didn't.^[4] Start shopping around for a Medicare plan three months before you turn 65. Also, be aware that you have options. For instance, there is an alternative to Original Medicare, which is called Medicare Advantage, also called MA.

MA plans are private health insurance plans that are still regulated by Medicare. There may be a monthly premium with an MA plan (or not), but you may also have coverages that Original Medicare does not, such as hearing, prescription drugs (Plan D), vision and dental insurance. Also, if you have an income, you may pay a higher premium.

If you prefer to have coverage from Original Medicare, consider buying Medicare Supplements (Medigap) to save money on prescription drugs (Plan D) and more. You cannot buy both Medigap and Medicare Advantage.

4. Delay Collecting Social Security But Get Medicare

Delaying retirement can really help if you anticipate an uncomfortably tight budget if you retire at age 65. In fact, you’ll earn a certain percentage each month that you delay retirement, but this benefit ends at age 70.^[5]

You can and should still apply for Medicare at age 65, even if you continue working. Otherwise, your benefits may cost more and may be delayed.

If you retire after age 65 but before age 70, some of your delayed retirement credits will not be applied until the January after you start receiving benefits.

5. Consider Life Insurance Needs

You may need life insurance in retirement to cover final expenses, like funerals and burials, and to pay off debts and estate taxes as well as leave an inheritance. Unfortunately, life insurance only becomes more expensive as you age.

You may also want access to a low-interest loan, which is what a whole life insurance policy would afford you. A term life insurance policy is less expensive, however, but only covers a term, like 10 or 20 years, depending on which type of policy you choose.

Life insurance becomes more expensive as you age, but in some instances, buying a policy may be well worth it.

A term life policy will always cost less than a permanent life insurance policy which does not have a term limit.

Another option you have with life insurance is to add an accelerated death benefit rider, which would allow you to collect a death benefit while you are still alive if you contract a terminal illness or need for long-term care services.^[6]

6. Car Insurance Goes Up, Compare Rates

Car insurance rates decrease as you get older, but then typically start to go up again around age 65 even if you don’t put a ding on your record at all.

Rate increases based on age vary by insurance company, but generally, seniors age 65 and up as higher are considered higher-risk drivers who are more prone to car accidents.. Also, they require more intensive medical needs if they are injured.

It’s a good idea to start comparing car insurance rates every six months to make sure you’re paying the least expensive premiums available.

7. Get a Homeowners Insurance Discount

Retirees spend more time at home as opposed to people who work so they may be eligible for a homeowners insurance discount. Being home more allows them to detect small problems that may otherwise escalate to expensive fixes if not caught immediately.

If a pipe bursts, for instance, it can be fixed right away, not eight to 10 hours later, which may result in more damages, possibly mold, which is not covered by home insurance, unless you have a rider.

With immediate attention to mitigate further damage, there’s less of a risk of a home getting destroyed and needing a full claim payout.